Psychology has been around for ages, long before anyone called it that. In fact, psychology is rooted in the philosophical thinking of Aristo, Descartes and others. There's a saying among psychologists that the difference between philosophers and psychologists is that the former only speculate, while the latter empirically research what they speculate about. This is an understatement of the differences between the two, of course, and psychology, much like other sciences, has actually emerged from philosophy.

In psychology we ask questions about the world around us, especially ones related to the mind. And as such, psychology is all about people. The way we think, behave, feel, and interact with each other and with the environment.

Contrary to popular belief, psychology is not a mere theoretical science where people lie on couches and pour their troubled thoughts in front of a nodding, bored looking, bold, beard-trimmed, middle-aged person. Psychology first emerged as an empirical science, when Wilhelm Wundt opened the Institute for Experimental Psychology at the University of Leipzig in Germany in 1879. His first experiments dealt with the perception of taste, smell & color. Today, the fields of Behavioral and Cognitive Psychology continue to explore these basic questions, but have evolved in the past century and a half to more complicated ones. Known representatives of these fileds include John B. Watson, Ivan Pavlov, B.F. Skinner, and more recent ones like Amos Tversky, Daniel Kahneman and Daniel Schacter.

The last couple of decades has also seen the rise of a new hybrid: the economical psychologist, better known as Behavioral Economists. These new “creatures” employ behavioral psychology in the understanding of economical thought, staate and structure. Amongst them you probably heard of Dan Arieli, Daniel Kahneman (again) and Richard Thaler.

We must also remember that when dealing with the human creature, we are almost always dealing with social constructs. Humans interact with each another, so Social Psychology plays an important part in understanding behavior.

So what is this channel all about?

I aim to upload a weekly post touching on one of the following fields that relate to a start-up, or any other company for that matter, during some point in its lifespan. These posts will give you insights about addressing your audience, be it your users, customers or employees (even employers, if you have them), about conversion, retention, or choose your favorite "-ions". This will be accomplished by exposing you to empirical data collected from real experiments, and then adding my perspective on product and/or marketing to it.

Bear in mind that this is not meant as a “to-do list” for the perfect site/app/company, since no such list exists (or we’d all be billionaires). It will provide advice, which you’ll often have to accommodate to your specific product. It will point out things to avoid, although here too, your judgement and discretion are advised.

You are encouraged to comment, ask, object and interact with me and others on the related subjects. And remember – I’m here to help you, as I’ve been doing all along, to tailor the best suit of psychological skills to your product.

Eduardo A. Schilman, Ph.D

Eduardo A. Schilman, Ph.D

The Ambiguity Effect

#1

HEURISTICS

We all use them, and rightfully so. But we should remember that like most things,

there's a good and bad to heuristics too:

The Good

Provides fast, close to optimal, answers when time or cognitive capabilities are limited.

The Bad

Violates logical principals and can lead to errors.

A good analogy here can be seen when looking at URL shorteners. A research performed by Buddy Media (now part of Salesforce) has shown that despite the popularity of URL shorteners, engagement was 3 times higher for full-length URLs! It appears that using these shortcuts had a downside to them. While most people find long strings of text boring, annoying and prefer shortened versions when available, the full-length URLs had the entire data reflected in them. So while https://itunes.com/apps/getstocks might be shortened to https://goo.gl/PjwSmX, a quick glance at the long URL entails trust and understanding – we know where we are being led to: the itunes store, to get an app. Getstocks app. The short URL on the other hand has no data at all. People distrust vagueness. They tend to act exponentially less on CTA (Call-To-Action) that are ambiguous, unclear or otherwise uninformative. This is known as “The Ambiguity effect”.

THE AMBIGUITY EFFECT/ Daniel Ellsberg (1961)

The tendency to avoid options for which missing information makes the probability seem "unknown"

Ellsberg demonstrated the effect using the following experiment:

Imagine a bucket contains 90 balls, 30 are known to be Red balls, and the rest an unknown proportion of Black and Yellow balls. A subject is allowed to choose between 2 options: (A) if he draws a Red ball, he wins $100, but if he draws Black or Yellow, he wins $0. Or (B) if he draws a Yellow ball, he wins $100. If he draws Red or Black, he wins $0.

Before you read on, answer it for yourself – what would you choose? Option A, or option B?

The probability of drawing a Red ball, if you chose option A, is 1/3.

The probability of drawing a Yellow ball, if you chose option B, is also 1/3. This is because the number of yellow balls is equally distributed among all possibilities between 0 and 60.

The results show that most people would prefer to bet on option A, rather than option B, the only difference between the two is that option A has a known favorable outcome, whereas option B has an ambiguous, unknown favorable outcome. People prefer option A because it is perceived to be more certain, even though the two probabilities are equal.

How can this effect be explained?

Frisch and Baron (1988) , for example, claim that the effect of ambiguity on decision making highlights the fact that we calculate the optimal decision, given what one knows. People often have a rule of thumb, a heuristic, to avoid choices that lack in information. This is a good heuristic, since more often than not, missing information should be sought out before a decision is made. However, sometimes that information is unavailable, as in the example above.

When discussing Decision Making under uncertainty, we can look at the following 5 scenarios: Certainty, Risk, “Black Swan”, Knightian and Radical uncertainty.

As we just saw, people tend to avoid unknown probabilities, so you should avoid uncertainty as much as possible. If your product is not clear enough, people will avoid it. If a banner is ambiguous, people will press it less. If a URL has no data, it will reduce engagement. Of course, the reason short URLs were introduced to begin with is because of those long, tedious text strings of URLs.

There is a golden path here to be taken, and some of you use it instinctively – branded short URLs.

It can look something like this: https://get.stocks/app.

But if you look at the above diagram, there is one more interesting take-home-message here: the “Black Swan”, or the “Bomb”. These are extreme events that are so rare we usually ignore in taking decisions, but have the potential to destroy everything. Forex companies depend on their customers unheeding the “bomb” that is leverage. People tend to be blinded by favorable outcomes and neglect to see the gaping hole that can swallow all their gamble in 30 seconds. But there is a flip side to the “Bomb”: The “Diamond”. These are extreme events with the potential to win it all. These are tools employed by marketers: promises of getting rich overnight, winning the lottery, meeting the woman of your dreams on Jdate ;)

Since we are in the business of winning the users over, keep in mind these 2 opposites, and use them to your own advantage.